ClimateInvest Podcast: Lidia Treiber, Trustee at One World Trust

In this episode of the Prestige ClimateInvest podcast we speak to Lidia Treiber, a trustee at One World Trust, a charity that promotes education and research into changes required in global financial governance.

One World Trust is active in the areas of AI governance, sustainability, ESG, climate change and environmental governance. It recently launched a series of webinars called Building Bridges for Sustainable Change exploring the interplay between ESG and the 17 United Nations Sustainable Development Goals (SDG).

Lidia is a senior investment professional with over 15 years of experience in asset management. In this podcast she talks about Europe’s stricter regulatory requirements for dark green investment certificates and how fund managers can improve their governance to ensure companies’ decisions align with their clients’ climate, social and responsibility values.

Over the last few years, but particularly since last year, retail investors and regulators have been putting more pressure on companies to become more proactive in aligning with ESG and SDG goals.

The EU introduced Article 9 of the EU’s Sustainable Finance Disclosure Regulation this January, the highest sustainability designation for investments. While this regulation has raised the bar for sustainable investment it has also left some grey areas and discrepancies in place, said Treiber.

The lack of clarity in the small print is creating a challenge for investment professionals when it comes to the definitions that each manager needs to apply. Managers have started taking a much more cautious approach when classifying investment products. A substantial number of funds have been reclassified into a slightly lower green bracket and going forward the launch of new dark green funds looks set to slow down until there is more clarity about which investments qualify as sustainable.

One of the grey areas has been created by the fact that SDGs are not legally binding. While a lot of companies already embrace those goals (over 18,000) there is still a lot of leeway when interpreting whether SDG rules are being applied. The investment industry can play an active role in ensuring that companies really commit to upholding their environmental and social responsibility. Pension funds, insurers and similar institutions providing capital to companies have the scope to be involved in governance and making sure that their voices are being heard by company boards.

New EU rules mean that companies will have to start reporting their societal impact in addition to their environmental reporting. Companies will have to provide much more data that will provide greater transparency to how well aligned they are with SDG goals.

For institutional investors with segregated mandates assessing funds this means looking through a fund’s holdings and potentially raising questions with managers if a company does not appear in line with their stated responsible investment objectives. It means asking for ESG or impact measurement reporting and trying to understand a manager’s stewardship policies, as well as looking at how the fund’s voice is being used to drive change at the board and senior leadership of the company.

While this can lead to an immediate financial loss for the companies there needs to be a conversation around how companies can go ahead with it, Treiber points out.

As there is increasing awareness about ESG issues among investors there is also more appetite for a bigger choice in ESG and carbon neutral investments. Product development will have to address this appetite with a bigger range of products with higher ESG adherence and a broader range of dark green investments.

To hear the podcast please click here.